The emergence of the so-called 'Rising Powers' - including but not limited to China, India, Brazil and Russia - represents one of the key drivers of global economic and social change. The Rising Powers and Interdependent Futures network funded by the Economic and Social Research Council includes 12 research projects at ten universities across the UK that explore these ongoing changes.

Wednesday, 27 August 2014

The state and the enforcement of labor laws in Brazil

By Salo Coslovsky

image by S. Coslovsky

In a recent article in Oxford Development Studies, Salo Coslovsky examines how labour inspectors and prosecutors have addressed enforcement of labour regulation in four critical sectors in Brazil. This post summarises some of the findings.
The last decades have seen a trend of economic liberalisation, combined with an increase in international trade and foreign direct investment in many countries, including in Latin America. One might expect this to go hand in hand with a 'race to the bottom' in labour regulation, as (developing) countries compete for investment. But contrary to such expectations, domestic labour laws have been upheld in many developing countries, due to a variety of factors. Some of the reasons for this include social clauses in international trade agreements, for example between the US and developing countries, as well as an increase in voluntary private regulation, such as codes of conduct in which multinational companies commit to improve working conditions in their supply chains. Less attention has been paid to the roles of developing country governments in enforcing labour laws and promoting improvements in labour practices, as these are often portrayed as too weak or corrupt to take on such tasks.

However, the experience of Brazil shows that government actors in developing countries can play an important part in promoting labour standards in a context of economic liberalisation. Examples from four sectors in the Brazilian economy show how government officials have intervened successfully to improve working conditions, while preserving the economic competitiveness of companies. In all of these cases, labour inspectors and prosecutors have played key roles in monitoring, but also in promoting innovative solutions for compliance with national labour laws.

Charcoal production:
Slave-like working conditions were common among small charcoal producers in the Amazon that supplied larger iron smelters. These producers were difficult to grasp for labour inspectors because many were not officially registered as companies. Moreover, individual producer were under immense competitive pressure that made them unable to raise wages for workers.

In this context, labour inspectors and prosecutors found a creative solution, making use of the fact that the informal charcoal producers were supplying large iron smelters, and drawing on a provision in Brazilian law that made it possible to hold these to account for labour law violations in their supplier firms. As a result, iron smelters established long-term contracts with charcoal producers and created a separate organisation to monitor working conditions. Simultaneously, this resulted in improved outcomes for workers and in better quality of charcoal supplied to iron smelters.

image by S. Coslovsky

Sugarcane:
A similar situation with accusations of slave labour existed in the sugarcane industry. Harsh working conditions were particularly common in sugarcane harvest on small independent plantations, which relied on informal labour contractors to employ migrant workers during harvest times. As in the case of charcoal, labour inspectors made the larger sugar mills that bought sugarcane from these smaller producers legally responsible for violations of labour regulations in their supplier firms. This resulted in significant improvements in working conditions in the industry, even if some problems persist on small farms.

Short-term employment in agriculture:
Small farms producing a range of agricultural commodities throughout the country have a need for temporary workers during harvest season, but are unable to employ these on a permanent basis throughout the year. Again these farms often rely on labour contractors as intermediaries, who tend to disregard labour regulations to minimize costs.

An innovative way out of this dilemma was found through establishing employers' consortia among small farmers that would directly employ workers on a permanent basis. Labour inspectors played an important role in the emergence of these consortia, for example by convincing tax administrators not to prevent the economic feasibility of such arrangements by charging higher social security contributions to consortia than to individual farmers. Employed by various farmers collectively, these workers would switch workplaces across farms, but continued to have a stable contract in compliance with labour regulations throughout the year.

Firework production:
In the case of firework production, unsafe working practices were common and conditions worsened further as firework producers came under pressure from cheaper Chinese imports. In this case, labour inspectors and contractors enforced compliance by imposing fines, but government agencies also supported producers in upgrading to international quality standards. In addition, the government raised quality standards required in the Brazilian market for fireworks, which gave Brazilian producers temporary protection from Chinese imports unable to meet these technical standards. As a result, Brazilian fireworks producers improved both working conditions and quality of their products, resulting in higher export revenues.

Several insights emerge from these four case studies that may be relevant also for post-neoliberal states elsewhere that try to combine economic growth and export competitiveness with social welfare. First, outsourcing and subcontracting arrangements should be closely watched, as these often tend to be associated with circumventing or violating labour laws. Second, international pressures from buyers and governments in export markets are not the main drivers of improvements in working conditions, but they can nevertheless make important contributions to strengthening local efforts. Finally, labour inspectors and prosecutors, acting with a relatively high degree of autonomy and in cooperation with the judiciary, have made crucial contributions to the effective implementation of labour standards in Brazil. In doing so, they have combined threats of sanctions with support for innovative strategies to facilitate compliance for companies without putting them at a competitive disadvantage.